Why are pyramid schemes illegal?

Question

When capitalism itself is ONE BIG PYRAMID SCHEME. I'm an eco student, I know. Quite frankly, I can't find an answer to the question: "How does everyone get richer in a comeptitive economy?"

If you earn money in a capitalist economy, someone somewhere is boudn to lose money. Money doesn't jsut appear out of nowhere. Wealth cicruclates, but it circulates inequitably.

So why is the US government so hypocritical in banning pyramid schemes and denying fast money to people when its whole economy is one big pyramid scam?! There should be a club just for people to come up with new pyramid ideas to earn money.

Answer 1

let me guess AMWAY. out of the ten or more people i know that have tried it, NONE of them have made any REAL money,

notice how they will always tell what somoeone else makes but not what they make,

it's almost a cult.

Answer 2

The government writes rules it doesn't apply to itself. Social Security meets the basic definition of a Ponzi scheme, but it is perfectly legal as long as government is doing it. If YOU tried to do it, you would be prosecuted.  

Answer 3

Hi Jack, I think they are illegal to discourage folks from getting involved in "scam-like" schemes. I don't know if you have heard of Oceanside Wealth yet but it is setup like a multi-marketing pyramid scheme. The only difference is that investors buy in the pot for $60 a month. Then "add" to it for additional earnings. The system uses FOREX for trading and is a matrix system that benefits all that "enlist" those down their powerline.

The great thing is this opportunity offers much potential. It is an offshore business meaning staying outside the regulations of the US. I am not sure if this is the only way to go about putting something like this together. It is sad that good idea opportunities get ruined by poor judgment, greed, and lack of leadership. Looking at this company's potential makes me want to change the norm on these "pyramid schemes". Perhaps, it can be done. I would hate to "need" staying within the rules without choice but having to alter course by staying outside the "law". If it can remain legit then I think that is where it matters the most. Also, my idea of one is where everyone benefits. If the government can gain from it then I think they would support it. Perhaps someone knows a better way to call a scheme that not only benefits some, but all involved. Like Pay it forward or the Circle of interest.

And the cool thing about this venture for me is that it has inspired me to create a business in similar fashion but done a whole lot better. People need a business and persons to trust. How do you gain trust through unknown waters and with strangers? I know part of the answer but a hard one to address.

Answer 4

1. capitalism is not a pyramid scheme. Yours is a sweeping generalization. To say it's a pyramid scheme is to predict that the whole thing will go bust at some time.

Capitalism is NOT a zero sum game. Dollars and value are created and everyone benefits. It is not a case of one person earning a dollar by taking someone else's dollar.

2. A pyramid scheme is illegal because it is based on a method that is not fully disclosed to the investor. The investor thinks he is being paid a genuine profit based on investments, when in fact it is merely the new money coming in from new sign ons that constitutes his "income." Because the pyramid base at some point becomes impossibly large, the whole device comes crashing down at some point. Pyramid schemes always go bankrupt at some point.

3. Social security, while it has aspects of a pyramid scheme, has the backing of the US government, which has the power of unlimited taxation. This makes it different from any privately run pyramid scheme.Thus it need not ever crash. The accounting is also disclosed, so that no one need to be duped when signing on to social security.